How To Pay Off Student Loans: Bankruptcy Protections and Dickensian Policy
December 18, 2012

Outraged by the trap of private student loans, Illinois Senator Dick Durbin was moved to draw a parallel between the current lack of bankruptcy protections for student loans and Dickens-era debtors’ prisons. It’s an understandable comparison; in Dickensian England, those who could not pay their debts were simply thrown in jail; the state of the economy at that time and place was such that for many, many people, debt was not realistically payable; consumers were out of options. Sound familiar?

As long as the Senator has opened the door to Dickens, especially at this time of year, let’s take advantage of the 19th century author’s wisdom. He was a man who observed people from all walks of life, never failing to infuse the humanity that unites us all into each of his characters. Dickens once wrote: “…it is you who have been, in your greed and cunning, against all the world. It may be profitable to you to reflect, in future, that there never were greed and cunning in the world yet that did not do too much, and overreach themselves. It is as certain as death.”

Today, we’re not throwing record numbers of private student loan defaulters in prison and throwing away the key, but under current bankruptcy policy, student borrowers are left in the hole, often with little hope of ever climbing out. The Senator was inspired to invoke master advocate for the disenfranchised, Charles Dickens, in the wake of a striking lack of attention paid to a bill he introduced last year.

The bill, called the Fairness for Struggling Students Act, would undo legislation passed in 2005, for the purpose of once again allowing private student loan debt to be discharged through bankruptcy. In other words, private student loan debt would no longer be treated differently under bankruptcy laws that any other type of private unsecured debt. By the way, both the Department of Education and the Consumer Financial Protection Bureau recommend such a change to bankruptcy protection for private student loans.

In his recently released statement, Senator Durbin declares: “How can it be that the deck is so stacked against students who borrowed to go through school? How can “certainty of hopelessness” be the standard for borrowers to obtain any relief in bankruptcy court. This harkens back to the debtors prisons of Europe and England. Charles Dickens would have a ball with this standard. Congress needs to address this issue.”

In the spirit of change and the coming new year, let’s remember that our actions have the power to change the world. We can choose not to allow the perpetuation of the culture that Dickens saw; one in which “men were weighed by their dollars, measures gauged by their dollars; life was auctioneered, appraised, put up, and knocked down for its dollars.” Thankfully, like Dickens himself, there will always be people speaking up to expose social ills and to assist those in financial traps. For help managing your student debt, there are student aid groups with the expertise to optimize debt.